Thank You Darling

The change in CGT should be great news for buy-to-let investors and owners of a second non-residential investment property as they will see a significant reduction in tax and therefore an increase in profit, should they decide to sell their assets.

Investors pay CGT on the difference between the price they paid for the property and the price they sell it for.

The new, simplified, system means that the length of time a property has been owned will be irrelevant; so someone who has kept a second home for one year will be taxed at the same rate as someone who has had it in their possession for 20 years.

Tapered Off

However, it’s not all good news for property owners. The Budget’s tax reform also included the abolition of taper relief and indexation allowance, which would have given some home-owners, who had bought their properties more than 25 years ago, a better tax relief than they will receive under the new rule.

April Rule

Fledgling investors, feeling the stress of the recent higher borrowing costs, stand to benefit from the new tax laws which began in April. Usually less equipped to cope against a downturn in the housing market, this could now be the perfect opportunity for them to sell up and increase their cash flow, without the fear of heavy taxation.

Alternatively, with the rise in demand for rental homes, and rent rates on the up, some seasoned investors are being tempted to hold onto their investment properties for a far longer period.

Dan Johnson, Managing Director, comments “So, long term or short, the change in CGT rate is good news for home-owners and if the property market gains momentum, some investors will make a ‘nice little earner’ by selling. But even if they decide to ride out the market’s uncertainty, the opportunity to maximise and profit from their rental yields leaves landlords in a win-win situation.”

News submitted by Jon Moore, The Move Channel